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Optical/IP Networks

Force10, Turin to Merge

After years of IPO talk and more than $400 million in VC backing, Force10 Networks Inc. is to merge with fellow Ethernet vendor Turin Networks Inc. in what looks like a defensive consolidation move. (See Turin, Force10 Announce Merger.)

An announcement is due to be made at noon Eastern time today, though financial details are not due to be revealed. Henry Wasik, currently Turin's president and CEO, will continue in those roles at the new company, which will be called Force10 Networks Inc.

Current Force10 CEO James Hanley, who only took on that job in November 2008, will become president, field operations, with responsibility for sales, marketing, services, and business development. The merger is expected to close in March 2009.

It's unclear what cost-cutting measures will be implemented once the merger is complete, though it seems inevitable that the initial combined workforce of around 900 staff will be reduced.

The merger looks like a defensive move as belts tighten in the service provider and enterprise markets, and competition intensifies in the consolidating Ethernet switch sector: Both companies are smallish vendors that stand a better chance of surviving as part of a larger company. (See Brocade Takes Aim at Cisco (& Juniper) and Feature Story: Juniper's Enterprise Vision.)

Not that the merger will create an enormous vendor.

Despite having delivered its products to more than 750 (mostly enterprise) customers during its near 10 years in business, Force10, best known for its 10 Gigabit Ethernet data center switches, is believed to have annual revenues of between $50 million and $100 million, though unconfirmed information on ZoomInfo suggests its sales could be as low as $36 million. (See Force10 Powers Telx, Force10 Deployed in Bahrain, and Force10 Shrinks 10-GigE.)

And it's still looking to innovate in the hosting and storage market, having branched recently into the increasingly important virtualization management space. (See Force10 Gets a View.)

Turin, meanwhile, claims more than 600 customers, including the top five mobile carriers in the U.S., and is believed to have revenues of around $60 million.

Turin, which is focusing on the carrier Ethernet, wireless backhaul, and converged access equipment markets, is clearly a company with ambitions. Only a year ago it paid $92.7 million for Carrier Access to buy its way into the growing wireless backhaul market and secure some major Tier 1 carrier customers such as AT&T Inc. (NYSE: T), and was bullish about its operator engagements and prospects during 2008. (See Turin Turns Up the Volume, Turin to Buy Carrier Access, and Turin Bulks Up With Backhaul Buy.)

It has also recently secured new financial backing from Dubai-based private equity firm Millennium Private Equity, which acquired a minority stake in the vendor for an undisclosed sum (believed to be around $15 million).

Force10 declined to comment on the merger prior to its official announcement, while Turin couldn't be reached as this article was published. The merger marks something of an inglorious end to Force10's long-awaited IPO plans, which had kept it on our "Top 10 Private Companies" list for years. The company had been talking about a public listing since 2004, and raised more than $400 million as a stand-alone company, including a $113 million round in February 2007. (See Force10 Round Hits $113M , LR Reshuffles Private Companies List, and Force10 Networks Inc.)

— Ray Le Maistre, International News Editor, Light Reading

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